It is possible that many people are unaware of how carelessly they waste money, where small mistakes add up to big losses.
But once you’re aware of these bad money habits, making small lifestyle changes and curbing unnecessary spending can help you reduce debt and increase savings, experts say.
About 76 percent of 1,015 Americans surveyed by personal finance product review site The Ascent in 2019 said they have paid excessive or unnecessary fees, 73 percent have paid excessive or unnecessary interest, 71 percent have resorted to impulse buying , while 68 percent have become redundant repeat purchases.
Other common ways of wasteful spending cited by survey participants included not returning unnecessary items after purchase, buying luxury items, overpaying for digital services, and not comparing prices or looking for discounts.
We spoke to personal finance experts to identify some of the most common types of money wasted and solutions to fix the problem.
Pay for unused subscriptions and memberships
You don’t have to have Netflix, Amazon Prime, Shahid, Disney+, OSN+, and Apple TV all at the same time, says Joseph El Am, general manager at wealth manager StashAway Mena.
Many people also forget to sign out of an app after the seven-day free trial. These subscriptions may seem fairly small (Dh20 or Dh30 per app per month), but they can quickly add up and waste your money, he warns.
According to an April survey of 1,000 people by US market research firm C+R Research, 86 percent of people have some, if not all, of their subscriptions on Autopay. About 42 percent said they forgot they were still being billed for a subscription they no longer use.
The survey found that 30 percent of respondents underestimated their subscription cost by $100 to $199, while 24 percent underestimated it by $200 or more.
Fitness apps or subscription boxes with free trials can be a great way to try a new product or service without full commitment. While signing up is easy, it’s also easy to forget about a free trial, especially if you’re only using it for a short time, according to Sophia Bhatti, a chartered wealth manager in Dubai.
Apps like Truebill can help you identify subscriptions you pay for but don’t use, she adds.
“If you’re not careful, you can easily end up spending hundreds of dirhams a year on subscription services that you don’t even use,” says Rupert Connor, Partner at Abacus Financial Consultants.
“Review your bank and/or credit card statements for the past year, identify subscriptions you are not using, and cancel unused subscriptions.”
An impulse buy is when you buy something that you didn’t plan to buy. Before you know it, those small, impulsive purchases can add up to hundreds of dirhams a month, experts warn.
According to an August survey by shopper marketing agency The Integer Group, an overwhelming 90 percent of shoppers buy items that aren’t on their shopping list. The most popular reason for impulse buying is a special offer or promotion, followed by shoppers finding a coupon to make a purchase.
“Coupons save you a little money, yes, but if you’re just doing couponing, you’re still wasting money,” said Vijay Valecha, chief investment officer at Dubai-based Century Financial.
“Stick to coupons for the things you already buy. The exception to this is when you make an expensive but necessary purchase that you don’t make regularly, such as a car. B. A car repair that you cannot repair yourself, and you can find a special coupon or discount for it.”
One solution to avoiding impulse buying could be to limit the number of shopping apps on your phone and also the number of trips to the mall, says Mr. Connor.
It’s better to buy consciously, says Mr. Valecha. Whether you’re shopping for clothes or groceries, you always have a list, he adds.
“Always ask yourself: do I need this? If the answer is no and it’s not on your list, resist,” says Mr. Valecha.
If you want to buy an expensive item, according to StashAway’s Mr El Am, wait 30 days. If you still think you need it, you can buy it; if it’s just a nice part, avoid it.
Use bonus and discount apps to save more. Some of them can get you up to 50 percent off purchases, he adds.
Going to the supermarket hungry can also be bad for your wallet, warns Ms Bhatti.
Hungry shoppers are more likely to be tempted by two-for-one deals, expensive snacks, and groceries they don’t really need, she says.
Before you go shopping, make a list of what you need to buy so you don’t get tempted when you arrive. If you head to the checkout hungry, be sure to stop for a light snack before heading down the aisles, says Ms. Bhatt.
Ordering most of your meals to-go gives you an opportunity to save money.
Sixty percent of US consumers are spending more money on grocery deliveries each month than before the Covid-19 pandemic, according to a May survey by training platform eduMe.
About 22 percent of respondents said they now spend an average of $50 to $99 a month on grocery deliveries, and 11 percent spend between $100 and $149, according to the survey.
“Many restaurants increase the cost of their items in delivery apps to account for the additional logistical headaches and service fees that delivery apps charge, and on your end there’s the delivery fee and a potential tip for your supplier,” says Mr. Connor.
“The key to financial health is making takeouts a thing you do every now and then, not for every meal. Try making your food at home by making dinner in the evening and making something for your lunch the next day.”
You could also avoid daily delivery orders by spending an hour every Sunday preparing food for the week. It will save you time and money, suggests Mr. El Am.
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Make minimum payments by credit card
You should pay off your credit card balance in full if you can afford it, says Ms. Bhatti.
“Your credit card balance will balloon quickly if you’re only making minimum payments and have a balance month after month,” she says.
“A high-yield debt can quickly accumulate and become unmanageable.”
Thirty percent of 1,249 Americans experienced an increase in credit card debt over the past two years, according to a March survey by financial services marketing firm LendingTree.
The survey found that 42 percent of millennials and 45 percent of parents with young children have struggled to pay credit card bills during the pandemic.
It’s important that you prioritize your credit card debt over any other transaction because you’ll drown month after month if you use the money for your own expenses and ruin your credit score too, warns Mr. El Am.
Take a look at last month’s credit card statements to see how much you’ve spent in card fees and interest, says Mr. Valecha.
“Try to save enough money before you buy something – that way you avoid having to buy it on credit,” he says.
“Pay off debt as quickly as possible: Make more than the minimum payment amounts and prioritize paying off debt before other luxuries. Set up direct debit orders for your credit card accounts to ensure you pay off interest charges as soon as your paycheck arrives.”
According to Ms. Bhatti, additional bank charges can waste money and be avoided by being more thoughtful about the purchases.
Overdraft fees can add up if you don’t monitor your account as payday approaches, and regularly hitting a negative balance is a sure sign something needs to change, she says.
Some banks may also charge fees for one-off items, such as
“Always ask if there is a charge for a one-time request, and consider if what you’re asking for is actually needed.”
Fear of missing out can make it easy to give in to social pressures to attend multiple brunches with friends.
At an average of Dh300 to Dh500 per brunch, expenses can quickly add up, says Mr Connor.
If you do one a week, that’s up to Dh2,000 a month, or Dh24,000 a year, he adds.
“Perhaps if you only think about brunch for special occasions or other activities for the weekend, those costs will be significantly reduced.”
Use the 50:30:20 rule for budgeting: Spend 50 percent of your monthly income on expenses like groceries, rent, and transportation, 30 percent on things you want like shopping, dining out, and travel, and 20 percent percent for things you want Savings and investments, says Mr. El Am.
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While extended warranties on your car or electronics can offset the cost of future repairs, they’re not always a good deal for consumers, Mr. Valecha says.
“Sometimes the cost of the plan exceeds the cost of potential repairs or doesn’t cover your problem,” he says.
“Also, many credit cards include extended warranty coverage for some purchases, so you may be paying for the coverage you already have.”
Consider funneling your extra money into an emergency account that you can use to cover repair costs should they arise, he says.
If you already have a fully funded emergency account, you might be able to skip this expense, he adds.
Updated September 29, 2022 6:47 am